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Chapter 10 Problems and Solutions

10-16 - Simple Interest 10-23 - U.S. Rule - Making Partial Note Payments before Due Date 10-31 - Simple Interest 10-32 - Finding Unknown in Simple Interest Formula Click here to view all problems and solutions. Chapter 10 Problems and Solutions. Problem 10-16.

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Chapter 10 Problems and Solutions

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  1. 10-16 - Simple Interest 10-23 - U.S. Rule - Making Partial Note Payments before Due Date 10-31 - Simple Interest 10-32 - Finding Unknown in Simple Interest Formula Click here to view all problems and solutions Chapter 10 Problems and Solutions

  2. Problem 10-16 On September 12, Jody Jansen went to Sunshine Bank to borrow $2,300 at 9% interest. Jody plans to repay the loan on January 27. Assume the loan is on ordinary interest. What interest will Jody owe on January 28? What is the total amount Jody must repay at maturity? Step 1: Calculate the number of days of the loan. 365 number of days in a year -255 September 12 110 +27 January 1 – 27 137 Step 2: Calculate the interest using I=PRT. $2,300 x .09 x 137 = $78.78 interest 360 Step 3: Add interest to principal to calculate the maturity value. $78.78 + 2,300 = $2,378.78 maturity value

  3. Problem 10-23 Max Wholesaler borrowed $2,000 on a 10%, 120-day note. After 45 days, Max paid $700 on the note. Thirty days later, Max paid an additional $630. What is the final balance due? Use the U.S. Rule to determine the total interest and ending balance due. Use ordinary interest. Step 1: Calculate the interest due for the first 45 days of the loan using I=PRT. $2,000 x .10 x 45 = $25.00 interest 360 Step 2: Subtract the interest owed from the partial payment to find the amount reducing the principal. $700 – 25 = $675 Step 3: Subtract the amount reducing principal from the principal. $2,000 - 675 = $1,325 adjusted balance

  4. Problem 10-23 continued Step 1: Calculate the interest due for from day 45 through day 75 of the loan using I=PRT. $1,325 x .10 x 30 = $11.04 interest 360 Step 2: Subtract the interest owed from the partial payment to find the amount reducing the principal. $630 – 11.04 = $618.96 Step 3: Subtract the amount reducing principal from the principal. $1,325 – 618.96= $706.04 adjusted balance

  5. Problem 10-23 continued Step 1: Calculate the interest due from day 75 through day 120 of the loan using I=PRT. $706.04 x .10 x 45 = $8.83 interest 360 Step 2: Add the interest due to the adjusted principal to calculate maturity value. $706.04 + 8.83 = $714.87 ending balance due Step 3: Calculate total interest. $25 + 11.04 + 8.83 = $44.87

  6. Problem 10-31 Carol Miller went to Europe and forgot to pay her $740 mortgage payment on her New Hampshire ski house. For her 59 days overdue on her payment, the bank charged her a penalty of $15. What was the rate of interest charged by the bank? Round to the nearest hundredth percent (assume 360 days). Step 1: Calculate rate using R = I P x T R = $15 = .1237 = 12.37% $740 x 59 360

  7. Problem 10-32 Abe Wolf bought a new kitchen set at Sears. Abe paid off the loan after 60 days with an interest charge of $9. If Sears charges 10% interest, what did Abe pay for the kitchen set (assume 360 days)? Step 1: Calculate principal using P = I R x T P = $9 = $540 .10 x 60 360

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